Are the dies a printer uses for diecutting, foil stamping, embossing, and engraving exempt from Texas sales tax as manufacturing equipment, regardless of how long the dies last?

Plain-English summary

A printer asked the Comptroller whether the dies used for diecutting, foil stamping, embossing, and engraving qualify for Texas's manufacturing exemption — the same way the machinery that uses them already did. A 1970s-era hearing (No. 29,072) had already treated dies as exempt like printing plates, but only because they typically wear out in under six months; that reasoning predated the broader manufacturing-equipment exemption that took effect January 1, 1995.

The Comptroller agreed the dies are exempt, but on a cleaner theory: diecutting, foil stamping, embossing, and engraving are all "processing" activities under Rule 3.300, and dies are necessary accessories to the processing equipment that performs them. Because they're accessories to already-exempt processing equipment, the dies are exempt regardless of how long they last — the six-month useful-life question from the old hearing no longer matters.

The letter also flags a related statutory change: effective October 1, 1997, Tax Code § 151.318(a)(2) was amended to require that exempt manufacturing equipment cause a chemical or physical change in the product. But § 151.318(t), the exemption written specifically for printers, does not carry that same chemical/physical-change requirement — so the printer-specific exemption path stayed intact even as the general manufacturing exemption got narrower.

What this means for you

Printers, publishers, and finishing shops

Dies used for diecutting, foil stamping, embossing, or engraving are exempt from Texas sales and use tax as accessories to exempt processing equipment — you don't need to track or prove a under-six-month useful life to claim the exemption.

Businesses buying manufacturing equipment generally (outside printing)

Watch the October 1, 1997 change to § 151.318(a)(2): most manufacturing equipment now must cause a chemical or physical change to the product to qualify for exemption. Printers get a specific carve-out in § 151.318(t) that doesn't require this, so don't assume the general rule's stricter test applies to printing-specific equipment.

Accountants and tax professionals

This letter is a good illustration of the Comptroller re-grounding an old, narrower holding (Hearing No. 29,072's useful-life test) in a newer, broader exemption theory (Rule 3.300 processing-equipment accessories) once the law changed — useful when a client's exemption position rests on an older ruling that a later statute may have superseded or broadened.

Common questions

Q: Do dies used for diecutting, foil stamping, embossing, or engraving qualify for the Texas manufacturing exemption?
A: Yes, as accessories to exempt processing equipment under Rule 3.300 — with no minimum or maximum useful-life requirement.

Q: Does the October 1997 change requiring a "chemical or physical change" affect printers' equipment exemption?
A: No. That change applies to the general manufacturing exemption in § 151.318(a)(2). The printer-specific exemption in § 151.318(t) does not require a chemical or physical change.

Q: Can I rely on this letter for my own printing business?
A: No. This ruling is based on the facts presented to the Comptroller and could change on different facts; it binds the Comptroller only as to the taxpayer it was issued to.

Citations and references

• Tex. Tax Code § 151.318(a)(2) (manufacturing exemption; chemical/physical change requirement added eff. 10/1/1997)
• Tex. Tax Code § 151.318(t) (printers' exemption, no chemical/physical change requirement)
• 34 Tex. Admin. Code Rule 3.300 (manufacturing exemption)
• Comptroller's Hearing No. 29,072 (dies treated like plates, useful-life test)

Subject

Printer/Publisher — Equipment (Dies, Photoengravings, Press) Used In Printing Process

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9712052L

Original ruling text

December 16, 1997

Dear**:

This is in response to your request for a ruling on the taxability of dies used

in the printing industry. Your fact situation is restated below followed by my

response:

In my reading of Hearing# 29,072, dies (as used in our industry) are treated

similar to plates, and since they are necessary and essential to the manufacturing of

printing, and have a useful life of less than six months, they are exempt from sales tax.

As we discussed on the phone last month, this ruling was made prior to printers

receiving a sales tax exemption for the purchase of manufacturing equipment.

Given that the equipment being utilized in the diecutting, foil stamping, embossing,

engraving processes are now exempt from sales tax, should not the dies which are used to

cut, emboss, and print be exempt as well?

The dies are an essential part of this aspect of our manufacturing process.

Without a die, the process of diecutting a sheet of paper to form a carton, or a

doorhanger is impossible. Without a die, foilstamping or embossing, which are used to enhance

a printed product (a.k.a. finishing), can not be done. And without a die, the

engraving process (a form of printing similar to the gravure process), which is used to

produce stationery and business cards, can not be accomplished.

Regardless of the "useful" life of the engraving, diecutting, foil stamping or

embossing dies," we feel that these items should be exempt from sales tax. They become an

integral part of the equipment and are necessary and essential in completing

the manufacturing process. Up to now, dies have been the only "printer's aid" which

has been treated differently. In a sense of fairness, and consistency, we would

like to see this changed.

Response: Effective January 1, 1995 a manufacturer may claim an exemption from

state and local taxes when buying machinery and equipment, accessories and

replacement parts that are necessary and essential to and used directly in

manufacturing, processing or fabricating or repairing or rebuilding products

that will be sold. [Editor's note: Effective 10/01/1997, Section 151.318(a)(2) was amended

to require that tangible personal property must also now cause a chemical or physical change to the manufactured

item. However, Section 151.318(t) (an exemption specifically directed at printers) does not require this provision.]

Diecutting, foil stamping, embossing, and engraving are considered processing activities.

Therefore, dies used in these processes are exempted as accessories to processing equipment,

without a consideration for the useful life of these accessories.

This opinion is based on the facts presented. Other facts though similar may

provide a different result.